Put $200,000 in stock ETFs averaging 0.04% fees and you’d have $2.0 million for retirement in three decades. But put the same $200,000 in mutual funds charging the industry average annual fee of 1.25%? You’d only have $1.4 million in 30 years.

Get it? You’d lose $600,000. You’d have $600,000 less for retirement. You’d lose but some clever advisers would pocket your $600,000 into their retirement accounts.

Wake up! It’s time to do it yourself, invest and manage your assets without paying big fees for advice. Why? Most of Wall Street’s advice is not only too costly, it’s unconscionable and usually not worth much. To see why, read these 10 warnings and tips:

1. The one big secret to successful investing—low expenses

If you remember nothing else, burn this into your brain. When we published “The Lazy Person’s Guide to Investing” one of the most valuable tips was from a study the Financial Research Corporation did for the industry insiders. They studied five fund categories: domestic equities, international-global, corporate bonds, government bonds and tax-free securities. Eleven predictors were tested: Past performance, Morningstar ratings, expenses, turnover, manager tenure, net sales, asset size, and four risk/volatility measures, alpha, beta, standard deviation and the Sharpe ratio.

Conclusion: only one had any predictive value: the expense ratio. All other predictors turned out to be unreliable, including Morningstar’s ratings and the Sharpe Ratio developed by a Nobel economist. Bottom line: pick cheap funds, no-load index funds.

2. American investors are losing over $100 billion annually to Wall Street

The financial industry has no moral compass, no integrity. You can’t trust them. Their total focus on getting rich is reflected in Jason Zweig’s Journal column, “Investors: How Dumb Are You?”: “The average investor in all U.S. stock funds earned 3.7% annually over the past 30 years.” That’s a third of the S&P 500’s 11.1% annual returns. Yes, stock funds have underperformed the market about “7.4 percentage points annually for three decades, according to Dalbar, a financial-research firm in Boston that has updated this oft-cited study each year since 1994.”

Yes, you lose $600,000. But Wall Street’s casino just keeps scamming your funds. Yes, massive sums of money. The S&P 500’s total capitalization is $16.7 trillion. So with Wall Street skimming 7.4% annually, American investors are losing over $100 billion from their retirement portfolios every year.

3. Vanguard’s Bogle warns: Wall Street is a rigged casino, get out

So why do Wall Street, all the mutual fund managers and the entire financial-advice industry get away with running what amounts to a rigged casino? More importantly: Why do so many of America’s 95 million investors let them get away with it? Vanguard’s Jack Bogle has been asking these questions for decades. In his classic, “The Battle for the Soul of Capitalism,” Bogle called this loss of a moral compass, “mutant capitalism.” He sees financial markets as a gambling casino with millions of “croupiers” manipulating the gaming tables 24/7, skimming billions off the top.

4. Advisers have no stock-picking skills

Actually it’s worse. Nobel economist Daniel Kahneman also used the casino metaphor in “Thinking, Fast and Slow.” Based on “50 years of research” he found that the “stock-picking skills” of managers and advisers is “more like rolling dice than like playing poker.” Their picks are no more “accurate than blind guesses.” In fact, “this is true for nearly all stock pickers ... whether they know it or not ... and most do not.”

5. Markets are notoriously unpredictable, irrational and dangerous

Wharton School of Finance economist Jeremy Siegel, author of “Stocks for the Long Run: The Definitive Guide to Financial Market Returns and Long-Term Investment Strategies,” researched 120 of the biggest up and biggest down days in the stock market over the last two centuries. Guess what? In only 30 of those big-move days did Siegel find any reasons for the market’s movement. In other words, 75% of the market’s biggest twists and turns in history were irrational and unpredictable black swans. Wall Street’s just guessing.

6. The more you actively trade, the less you earn

You think trading will bring you bigger profits, peace of mind for retirement? Nope. For six years University of California behavioral finance professors Terry Odean and Brad Barber researched 66,400 portfolios with a big Wall Street firm. They found three key factors that resulted in substantially reducing investor returns: transaction costs, stock-picking skills and taxes. Active traders averaged 258% portfolio turnover annually. But they earned seven percentage points less annually than buy-and-hold investors whose average turnover was a mere 2%.

7. Online trading makes it easier to lose, faster and even more

Another Odean-Barber study shows that investors who converted from off-line to online trading saw their returns drop substantially. Before going online they were beating the market by 2%. Afterwards they were losing, under the market by 3%. Stay out. Before one of the largest online discount brokers, Ameritrade, went public, the founder, billionaire Joe Ricketts, told Fortune: “The best thing, really, for an investor to do is buy a good company and hold it ... Trading often and heavy is not something that makes you a lot of money. That’s contrary to my own interests, but it is the truth.”

8. Investors encouraged to buy high/sell low, losing at top and bottom

Your trading and stock-picking skills are probably as bad your adviser’s. A key Morningstar study concluded that investors tend to get in and out of the market at the wrong time, buy high, sell low and lose. They go in at the top. Get out at the bottom. Irrational exuberance creates a buying frenzy at the top. Investors jump in. They lose. Then hang in there as the market drops, buying on dips. More drops. Panic, fear sets in, they sell at the bottom. Lose. Warning, Playing in the market casino is a fool’s game, a waste of your time. Buy and hold … and hold.

9. Warning, your brain’s a saboteur and Wall Street’s manipulating it

One behavioral-finance study reported in Money magazine concluded that 88% of investors experience a phenomenon psychologists call “optimism bias,” overconfidence. Then, we make bad investment decisions taking on too much risk, and lose. Then we hide that reality, lie to ourselves about how bad it wasn’t. Over half the overconfident investors who thought they were beating the market in the recent bull, were lying to themselves, underperforming by 5% to 15%. But could not admit failure. Our brains are too often our worst enemies.

10. Most stock market day traders really don’t make much money

Trading is not the get-rich-quick scheme that the overoptimistic newsletter gurus want you believe. Yes, you can trade online for a few bucks a pop. But you can still make lousy picks. Lose fast and furious. Other Odean-Barber research reveals that as many as three-quarters of traders lose money. And in the end even the rare successful trader rarely make more than $100,000 a year, averaging half that. As David Dreman put it in his “New Contrarian Investment Strategy,” “Market timers, if they don’t die broke, rarely beat the market.”

Even the best professionals don’t trust their own ability to predict the market. Like Ted Aronson. His firm manages a $24 billion institutional fund. But his family’s taxable money is invested in low-cost index funds, his Lazy Portfolio. Asked if investors should gamble in Wall Street casino, he said: “For good reasons and bad, I’d hold tight. The good include my faith in capitalism and its ability to weather a storm, even one of biblical proportions. The bad reason is, I have no faith in my ability to time this sort of thing. Even if I got out in time, I probably wouldn’t be able to correctly time getting back in!”

Yes, very simply, Wall Street is a high-risk gambling casino, where the house always wins. You can’t trust it. They are skimming over $100 billion from America’s 95 million Main Street investors every year. My advice to investors is stop paying your heard-earned money to advisers with no real stock-picking skills, whose advice is “more like rolling dice than like playing poker,” and no more “accurate than blind guesses.”

Take charge of your future, hone your own skills. You’ll save money, you’ll have a bigger nest egg for the future.

1. Did you know that when the "Minimum Sentences for White Collar Crime" Bill C21 was passed with this government, that investment bankers and those who deal in public markets were able to "delete" the section of the criminal code of Canada, as it applied to this very bill. They were able to "negate" the jail term provisions that might apply to public markets. I was in Ottawa, testifying on the bill when it was happening. see this video for a quick and dirty synopsis https://www.youtube.com/watch?v=Toem8yC0Fx4 1 minute 30 seconds

2. Were you aware that 13 securities commissions in Canada are 100% paid by investment industry fees and charges?

3. Did you know that in Alberta and Ontario that top Securities Commission people earn over $700,000 per year, and in Alberta the top four employees shared $2 million between them? For public employees?

4. Were you aware that securities commission officials will grant "exemptive relief" to our provincial laws, to securities dealers in order to sell defective, toxic products to consumers, or to give faulty advice, allowing dealers to make multiple-times more money?

5. Did you know that these exemptions are hidden from input and from view by the public who purchases the investments which are magically turned from illegal to legal with a securities lawyer's pen?

6. There are approximately 500 such exemptions granted by these securities commissions each year, and in no cases will the securities commission show cause, process, and proof of no harm to the public interest from these legal games.

7. More recently, "exempt market securities" have lifted over $2 billion from the hands of the public, into the hands of fraudsters. Secondary effects show that some well connected lawyers and accounting firms are realizing as much or more money from the "rubble" (receivership process) than even did the original fraudsters.

8. The largest crime in Canada was $35 billion gone in sub prime mortgage securities, which were illegal for sale in Canada, were it not for the saving grace of friendly securities regulators, who granted exemptive relief so these products could be sold, and Canadians victimized.

9. $2 billion was taken from the PSPP (the pension plan of retired judges and RCMP) at the same time that judges were granting "immunity" from prosecution to those responsible (I assume they do not know to this day, but the PSPP annual report for 2008 includes the write downs)

10. Regulators turn a blind eye daily to 150,000 investment salespersons in Canada, who do NOT carry the proper license nor fiduciary duty to call themselves "advisers", under the law, however by spelling their title "advisor" with an "o" rather than an "e", they may be able to skirt the spirit of this legal license category and fool the public into a false sense of trust. A University of Toronto study puts the harm to Canadians in just the retail sale of mutual funds alone, at about $25 billion each year gouged out of Canadians who are not aware of this "adviser/advisor bait and switch". video concept here https://www.youtube.com/watch?v=Ot-a2eF2zgQ one minute and 39 seconds

I find myself rather blown away by the ability of the financial industry to "own" the media in Canada, with their advertising dollars, and I am seeking ways and means of working outside the box to get this info out to the public. It is certainly not as easy as simply pointing these things out. The media has a part to play in disclosure.

Two years ago, the SEC’s botched proposal for a uniform fiduciary standard was greeted with a uniform chorus of derision from both Congress and the brokerage industry. The biggest complaint was the alleged “cost” to investors should the SEC hold brokers to the same standard as it holds Registered Investment Advisers under the 1940 Investment Advisers Act. The SEC asked the industry to show evidence of this cost, but, sheltered by the bipartisan boos from the political realm, never seemed to provide the promised smoking gun. It turns out, a much publicized academic research study released last month may have finally supplied the much anticipated evidence of cost – but with a surprising twist.

The paper, “It Pays to Set the Menu: Mutual Fund Investment Options in 401k Plans,” (Pool, Veronika Krepely, Sialm, Clemens and Stefanescu, Irina, January 20, 2013), is the result of work done by researchers from Indiana University and the University of Texas at Austin. Much of the media reporting focused on the study’s confirmation of what many had long suspected: trustees who were allowed to engage in self-dealing transactions often do, and often at the worst possible time. Pool et al concluded trustees with a conflict of interest are more likely than unconflicted trustees to keep and to add poorer performing affiliated funds. Worse, employees continued to invest in these poorer performing options even though they had better alternatives.

This conclusion is similar to that drawn by “Broker Incentives and Mutual Fund Market Segmentation,” (Diane Del Guercio, Jonathan Reuter, Paula A. Tkac, NBER Working Paper No. 16312, August 2010). This paper found investors earned, on average, 1% more per year by buying mutual funds directly instead of through a broker (you can read the full report in our earlier story, “Does New Study Seal the Deal for Fiduciary Standard – or Just Warn Plan Sponsors?” FiduciaryNews.com, January 19, 2011). “Both studies look at agency problems in delegated portfolio management but they focus on very different aspects (brokers vs. 401k trustees),” says Irina Stefanescu, Assistant Professor of Finance at Indiana University’s Kelley School of Business and one of the co-authors of last month’s study.

The new study concentrates only on listed trustees. “We collected the names of the ‘plan trustees’ as they are disclosed in the 11-K,” says Stefanescu. “We have not focused on conflicted advisors.”

That conflicts-of-interest exist in the 401k service provider world isn’t surprising. “Unfortunately, it is quite common for mutual fund companies that also act a ‘non-discretionary’ plan trustee to encourage the use of their own proprietary funds,” Houston-based Robert A. Massa, Chief Investment Officer at Ascende Wealth Advisers, tells FiduciaryNews.com. He continues, “To address this problem, I take a considerable amount of time to educate the plan committee members on delineating the differences between the services provided by the plan recordkeeper, the plan trustee and the investment provider(s). Most committee members have a hard time understanding the difference. If they hire a mutual fund company to handle all plan services on a turn-key basis, it can be difficult for the committee members to fully understand the fees and services provided because of the one-stop shopping approach. But this is the core problem. In these fully-bundled, one-stop-shopping arrangements, employers can usually offer a 401k program with great educational materials and online technology, but if they fail to perform their due diligence, they can end up with a stable of funds that may underperform the market.”

“In an ideal world, all fiduciaries that act for a plan under the auspices of ERISA should operate independently,” says Gabriel Potter, Senior Researcher at Westminster Consulting, LLC in Rochester, New York. Potter adds, “Individual advisors acting as consultants may adopt the title of ‘fiduciary’ without really understanding the legal ramifications of the decision. Investment management firms often take up the fiduciary mantle when acting as a consultant, but may be incapable of separating themselves from the inherent conflict-of-interest. It is the advisors’ responsibility to understand if their duties preclude them from being a fiduciary adviser, but the roles of a fiduciary vs. a non-fiduciary individual advisor are sorely misunderstood, even by professionals.”

Making their conclusions even more dire, the study’s sample does not include conflicts-of-interest resulting from brokerage-based “advice.” Paula Hendrickson, Director Retirement Plan Consulting at First Western Trust in Denver, Colorado says, “Many plan sponsors join forces with a brokerage firm to develop their investment strategy and the broker has an inherent conflict-of-interest.”

But the study does reveal something that stunned even the researchers. “Perhaps the most surprising result was the future underperformance for the lowest performance decile funds,” says Stefanescu. The study concludes “We estimate that on average they underperform by approximately 3.6% annually on a risk-adjusted basis. This figure is large in and of itself, but its economic significance is magnified in the retirement context by compounding. Our results suggest that the trustee bias we document in this paper has important implications for the employees’ income in retirement.”

Just how economically significant is this result? FiduciaryNews.com asked Stefanescu if the authors came up with a dollar figure, but she told us, “Translating these percentages into dollars depends on various assumptions on holding periods and compounding horizons.” Still, that doesn’t prevent anyone from using published data to come up with a number.

And that’s precisely what we did.

According to the January 24, 2013 entry of January Market Size Blog, U.S. retirement assets (including IRAs, 401k plans and 403b plans) total $10.3 trillion at the end of the third quarter in 2012. The universe of trusteed plans in the “It Pays to Set the Menu” paper indicates 33% of the assets are held by “conflicted” trustees. We’ll assume this number for 403b plans and IRAs as a way of accounting for conflicted brokers. (Please note, the 33% number does not mean only 33% of the plans are advised by conflicted vendors, it only means the actual conflict occurs in only 33% of the assets. In other words, a conflicted adviser is likely to also put assets into unaffiliated funds.) A third of the total U.S. retirement assets is $3.4 trillion. Now, we take 10% of that reflecting the lower performing decile of funds and that’s equal to $340 billion. Finally, we take the average underperformance of 3.6% annually and you get $12.3 billion of lost performance each year.

That’s more than a billion dollars a month, or $24.6 billion since the adoption of a uniform fiduciary standard was first proposed.

Elle Kaplan, CEO & Founding Partner of Lexion Capital Management LLC in New York City explains the true tragedy of this wholly unnecessary delay as she expresses concern the indictment of studies like this might take the bloom off the rose of the 401k plan. She says, “Embedded in the term ‘conflict-of-interest’ is the key word: conflict. The fact these conflicts exist is a major problem and should be extremely troubling to all 401k plan advisers. If we are encouraging people to save for retirement, but then we give them options that are poor investment vehicles with bad returns, we are hurting the very people we are supposed to help. We are letting a few bad apples get in the way of delivering responsible options for retirement planning.”

If you enjoyed this article, you’d probably enjoy Mr. Carosa’s latest book, 401(k) Fiduciary Solutions. Published by Pandamensional Solutions, Inc., this highly recommended book contains 320 pages of insights from some of the industry’s most well-known thought leaders. 401(k) Fiduciary Solutions covers all 401k compliance issues in a single reference source. It is written for plan managers, sponsors and others with 401k plan fiduciary responsibilities. Click here to order it now direct from the publisher’s site on Amazon.com.

If the average property crime in Canada carries a cost to society (I recall seeing this figure at Justice Canada or Stats Canada site) and there are some 90,000 property crimes each year.........then the sale of toxic sub prime mortgage investments in Canada was white collar crime equal to 6.4 million property crimes.

SIX POINT FOUR MILLION individual crimes..........or the financial equivalent of same......done by financial Mega Criminals, our own white collar banking and financial people, assisted by lawyers, accountants, regulators, and the usual cast of characters. Not one single criminal charge among the total.

Imagine if you could figure out how to commit the equivalent of six point four million crimes......and know that no one would ever get caught and no one would go to jail. (this was just one type of investment, non bank ABCP investments, and in no way reflects the total amount of financial damage done each and every year by these same Mega Criminals)

Lawyer Purdy Crawford (head of the ABCP restructuring process) went into court arguing for immunity from criminal and civil prosecution for the toxic sub prime mortgage paper collapse. He obtained immunity from civil prosecution for all involved, but did not receive immunity from criminal. ( he was also involved in the "largest crime in Canadian history", according to the RCMP, which resulted in a company he headed (Imperial Tobacco under Imasco Ltd) paying a $1 billion dollar fine for tobacco smuggling)

(Conrad Black was able to do the equivalent damage of 1200 or 12,000 property crimes, depending upon which amount of his crimes you work on, the amounts he was successfully prosecuted on, or the alleged amount he actually lifted. He was not able to be prosecuted in Canada, but had to be brought to justice by US authorities.)

RCMP IMET managed to bring together five (5) convictions for white collar crime by the IMET organization since it was began eight years ago, and in no case have I seen convictions, prosecutions, or even investigations undertaken on Mega Criminals beyond the $100 million mark.

My conclusion is that if you get yourself into the position of a Mega Criminal in Canada, (too big to prosecute), then financial crime is free from consequences. Unfortunately, this is not only the rantings of a more than slightly disturbed individual, but appears to be somewhat supported by the facts.

Daniel Rosenbaum for The New York Times“Traditionally, a bank would tell the Department of Justice when an employee engaged in crimes, but what do you do when the bank itself is run by a criminal enterprise?” said Solomon L. Wisenberg, former chief of a Justice Department financial institutions fraud unit.By GRETCHEN MORGENSON and LOUISE STORYPublished: July 7, 2011

As the financial storm brewed in the summer of 2008 and institutions feared for their survival, a bit of good news bubbled through large banks and the law firms that defend them.

Matt York/Associated PressBeazer Homes ran afoul of the Department of Housing and Urban Development over its mortgage practices. But the Justice Department came to an agreement with the company, ending HUD's inquiry.

Daniel Rosenbaum for The New York Times"They threatened the HUD office of the inspector general that we would not be allowed to go forward with our investigation of executives if we didn’t agree to their settlement," said Kenneth M. Donohue, former inspector general of HUD, speaking about the Justice Department.Readers' CommentsReaders shared their thoughts on this article.Read All Comments (179) »Federal prosecutors officially adopted new guidelines about charging corporations with crimes — a softer approach that, longtime white-collar lawyers and former federal prosecutors say, helps explain the dearth of criminal cases despite a raft of inquiries into the financial crisis.

Though little noticed outside legal circles, the guidelines were welcomed by firms representing banks. The Justice Department’s directive, involving a process known as deferred prosecutions, signaled “an important step away from the more aggressive prosecutorial practices seen in some cases under their predecessors,” Sullivan & Cromwell, a prominent Wall Street law firm, told clients in a memo that September.

The guidelines left open a possibility other than guilty or not guilty, giving leniency often if companies investigated and reported their own wrongdoing. In return, the government could enter into agreements to delay or cancel the prosecution if the companies promised to change their behavior.

But this approach, critics maintain, runs the risk of letting companies off too easily.

“If you do not punish crimes, there’s really no reason they won’t happen again,” said Mary Ramirez, a professor at Washburn University School of Law and a former assistant United States attorney. “I worry and so do a lot of economists that we have created no disincentives for committing fraud or white-collar crime, in particular in the financial space.”

While “deferred prosecution agreements” were used before the financial crisis, the Justice Department made them an official alternative in 2008, according to the Sullivan & Cromwell note.

It is among a number of signs, white-collar crime experts say, that the government seems to be taking a gentler approach.

The Securities and Exchange Commission also added deferred prosecution as a tool last year and has embraced another alternative to litigation — reports that chronicle wrongdoing at institutions like Moody’s Investors Service, often without punishing anyone. The financial crisis cases brought by the S.E.C. — like a recent settlement with JPMorgan Chase for selling a mortgage security that soured — have rarely named executives as defendants.

Defending the department’s approach, Alisa Finelli, a spokeswoman, said deferred prosecution agreements require that corporations pay penalties and restitution, correct criminal conduct and “achieve these results without causing the loss of jobs, the loss of pensions and other significant negative consequences to innocent parties who played no role in the criminal conduct, were unaware of it or were unable to prevent it.”

The department began pulling back from a more aggressive pursuit of white-collar crime around 2005, say defense lawyers and former prosecutors, after the Supreme Court overturned a conviction it won against the accounting firm Arthur Andersen. That ended an era of brass-knuckle prosecutions related to fraud at companies like Enron.

Another example of this more cautious prosecutorial strategy: Government lawyers now go to companies earlier in an inquiry, and often tell companies to figure out whether improper activities occurred. Then those companies hire law firms to investigate and report back to the government. The practice was criticized last year when the Justice Department struck a settlement with Beazer Homes USA, a home builder accused of mortgage fraud.

This “outsourcing” of investigations — as some lawyers call it — has led to increased coziness between the government and companies, some critics say.

In banking, the collaboration is even stronger, dating to the mid-1990s when banks were asked to regularly report suspicious activities to the Treasury Department, an effort that aimed at relieving regulators of some of their enforcement loads. But it gave regulators a false assurance that banks would spot and report all wrongdoing, former investigators say. Moreover, companies are not as likely to come forward with evidence related to senior executives or to widespread patterns of misbehavior, some academics say.

Intended to make the most of the government’s limited investigative resources, the government’s cooperation with corporations and industry groups can work well and save money when business hums along as usual. But some veterans of government prosecutions question such collaboration in financial crisis cases, and contend they should have been pursued more aggressively.

“Traditionally, a bank would tell the Department of Justice when an employee engaged in crimes, but what do you do when the bank itself is run by a criminal enterprise?” said Solomon L. Wisenberg, former chief of the financial institutions fraud unit for the United States attorney in the Western District of Texas in the early 1990s. “You have to be able to investigate without just waiting for the bank to give you the referral. The people running the institutions are not going to come to the D.O.J. and tell them about themselves.”

A Clash of Agencies

Beazer Homes, based in Charlotte, N.C., became one of the nation’s 10 largest home builders in the 2000s — in large part because of mortgage lending options that attracted buyers. But its mortgage business eventually attracted prosecutors, too.

In March 2007, the inspector general and officials of the Department of Housing and Urban Development began investigating claims that Beazer had engaged in mortgage fraud, causing losses to the Federal Housing Administration’s insurance fund that covered mortgages when buyers couldn’t pay.

Investigators found that Beazer had been offering a lower mortgage rate if buyers paid an extra fee, but then not giving them the lower rate. And it was enticing homeowners by offering down payment assistance, but not disclosing that it then raised the price of the house by the same amount.

The Beazer board’s audit committee hired the law firm of Alston & Bird to conduct an internal investigation. Documents supplied to Congress by HUD show that Justice Department officials advised HUD investigators not to interview borrowers or former Beazer employees until Alston & Bird completed its review.

In April 2009, justice officials notified HUD that a deferred prosecution agreement with Beazer had been reached — the sort of deal that Sullivan & Cromwell had celebrated in its client memo a year earlier — essentially shutting down the HUD investigation.

Beazer agreed to pay consumers and the government as much as $55 million under the deal. It also paid approximately that amount to Alston & Bird, investigators found. While a member of the justice team told HUD that criminal proceedings would be forthcoming against individuals at Beazer, the documents show, there has been only one indictment: of Michael T. Rand, the company’s former chief accounting officer, whose trial is to begin this fall.

A year after the settlement, Kenneth M. Donohue, the inspector general of HUD at the time, raised questions about its handling. He said he was disturbed by the interference by the Justice Department and its calls to stop pursuing Beazer executives so the deferred prosecution deal could be completed. “As a law enforcement official for over 40 years,” Mr. Donohue wrote in a letter to Eric H. Holder Jr., the attorney general, “I have never witnessed a like action in any of my varied dealings.”

In a recent interview, Mr. Donohue, now a senior adviser at the Reznick Group, an accounting firm in Bethesda, Md., said of the Justice Department: “The most important point of this whole thing is the fact that they threatened the HUD office of the inspector general that we would not be allowed to go forward with our investigation of executives if we didn’t agree to their settlement.”

David A. Brown, acting United States attorney on the case, said: “What we do is work cooperatively as a team in conducting these investigations. We don’t tell agencies to stand down when they are working as part of the team.” He said that the investigation was continuing, and that the Justice Department was proud of the deferred prosecution agreement and the restitution Beazer paid, which more than covered the losses of the Federal Housing Administration fund.

Beazer did not respond to an e-mail, and Alston & Bird did not return a call seeking comment.

Ms. Finelli, the department’s spokeswoman, said that deferred or nonprosecution agreements had led to charges against individuals in many cases; of the 20 companies she cited, three were financial companies. But none were cases related to the financial crisis.

Still, some lawyers applaud the closer relationship between the government and business. “Given the scanty resources that have been committed to corporate crime enforcement, I think the government’s leveraging of its prosecution power from corporations and their lawyers has been critically important,” said Daniel C. Richman, professor of law at Columbia and a former assistant United States attorney in New York.

But Professor Richman added that the government should have “a much more developed, funded and empowered S.E.C., Federal Reserve, E.P.A. and other agencies to do regulation, to do enforcement and feed cases where necessary to criminal prosecutors.”

Changing Course

The names have become synonymous with corporate wrongdoing — and forceful prosecution: Not just Enron, but also WorldCom, Tyco, Adelphia, Rite Aid and ImClone. In the early part of the last decade, senior executives at all these companies were convicted and imprisoned.

But by 2005, a debate was growing over aggressive prosecutions, as some business leaders had been criticizing the approach as perhaps too zealous.

That May, Justice Department officials met ahead of a session with a cross-agency group called the Corporate Fraud Task Force. It was weeks after Justice Department lawyers had presented to the Supreme Court their case against Arthur Andersen, which was seeking — successfully, it would turn out — to overturn its criminal fraud conviction in a prominent case.

In the meeting, the deputy attorney general at the time, James B. Comey, posed questions that surprised some attendees, according to two people there who asked to remain anonymous because they were not supposed to discuss private meetings.

Was American business being hurt by the Justice Department’s investigations?, Mr. Comey asked, according to these two people, who said they thought the message had come from others. He cautioned colleagues to be responsible. “It was a total retrenchment,” one of the people said. “It was like we were going backwards.”

Mr. Comey said recently that he did not recall this conversation.

Around the same time, the Justice Department was developing instructions on dealing with companies under investigation — particularly companies that work with the government. It issued a memo in 2003 that gave companies more credit for cooperating than in the past. That message was reinforced in another memo in 2006.

As the first memo put it, “it is entirely proper in many investigations for a prosecutor to consider the corporation’s pre-indictment conduct, e.g., voluntary disclosure, cooperation, remediation or restitution, in determining whether to seek an indictment.”

During this period, the Justice Department increased the use of deferred prosecutions or even nonprosecution agreements.

Many well-known companies have benefited. In 2004, the American International Group, the giant insurer, paid $126 million when it entered a deferred prosecution agreement to settle investigations into claims that it had helped clients improperly burnish financial statements.

Deals over accounting improprieties also were struck that year by Computer Associates International, a technology company, and in 2005 by Bristol- Myers Squibb, a pharmaceutical concern. Prudential Financial entered into a deferred prosecution in 2006 over improper mutual fund trading.

No such prosecution deals for large banks have yet arisen out of the financial crisis. Some bank analysts say they may be coming. The government may eventually strike one with Goldman Sachs, which it continues to investigate for its mortgage securities dealings, Brad Hintz, a securities analyst at Sanford C. Bernstein & Company, wrote recently. “If an alleged violation is identified during a Goldman investigation, we expect a reasoned response from the Justice Department,” he added.

Goldman Sachs declined to comment.

The S.E.C. can also file deferred prosecutions, and it sometimes issues reports about wrongdoing in lieu of litigation. It has been increasing the number of reports it files, and is considering issuing one about misleading accounting at Lehman Brothers, Bloomberg News has reported. The S.E.C. did something similar last year to resolve a credit ratings investigation of Moody’s Investors Service. The reports from the commission are intended to give companies guidance on appropriate practices.

Such results provide bragging rights among corporate defense lawyers, according to longtime observers of the legal system.

“The corporate crime defense bar has this down to a science,” said Russell Mokhiber, the editor of Corporate Crime Reporter, a publication that tracks prosecutions. “I interview them all the time, and they boast about how they’ve gamed the system.”

Industry Advantage

Even as companies cooperate with the government, they also work closely with one another, creating industrywide strategies in response to investigations. Legal representatives for Goldman Sachs, Morgan Stanley, JPMorgan Chase and others talk regularly about what they hear from the government, according to lawyers in the industry. They have long held these conversations — known as joint-defense calls — but given the increased cooperation of the government with companies, lawyers can exchange more information.

Goldman’s recent battle against the S.E.C. — in which it agreed to pay $550 million to settle claims that it had misled investors in a mortgage security it sold — was helpful to other banks, according to one lawyer who participates in these calls. On several occasions in 2009 and 2010, after Goldman and its law firm, Sullivan & Cromwell, visited the S.E.C., lawyers representing other banks received intelligence on the government’s areas of interest. The result has often been that banks walk into prosecutors’ offices well-prepared to rebut allegations.

One assistant United States attorney, who requested anonymity because he is not allowed to speak with the news media, said many inquiries had been tabled because banks had such good answers.

“They’ll hire a counsel who is experienced,” said the assistant attorney, who has direct knowledge of cases related to the financial crisis. “They often come in and make a presentation: ‘We’ve looked at this and this is how we see it.’ They’re often persuasive.”

Some defense lawyers say it is easier to make a persuasive case because prosecutors, having becoming more dependent on companies for investigative legwork, are less knowledgeable and thus less likely to counter with evidence they have uncovered.

The process, in the end, is cloaked, some critics say. The Justice Department does not disclose any details about its decision-making in specific cases, such as why it did not charge individuals at a company.

“We will not get an explanation of why there haven’t been prosecutions; at best, we will get a reference back to the Department of Justice manual that leaves the discretion to the prosecutors,” said Professor Ramirez of Washburn University. “The legal representatives will argue that since recoveries can be had by using civil measures, even private litigations, there’s no need to bring criminal measures. I disagree with that very much.”

According to the Canadian Anti Fraud Center (Calgary Herald Sat April 23, 2011), they recorded "$53 million lost due to mass market frauds such as spam email and telephone scams".

Most years I can come up with $35 billion quite easily lost due to predatory investment practices by investment "professionals" in Canada. $35 billion is "systemic", built into the profits of financial pros each year due to the distinct advantages or "decriminalization" that self regulation offers the industry.

First, $25 billion each year is gouged from mutual fund consumers due to monopolistic mutual fund selling and managing practices of the few largest institutions here in Canada. ( source THE $25 BILLION PENSION HAIRCUT, a study by pension expert Keith Ambaschteer, University of Toronto, Rotman School of Business, also backed up by mutual fund fees around the world joint studies done by London School of Economics, Harvard, and Georgia Tech)

Then add in $10 billion each year added costs of having thirteen provincial and territorial securities commissions in an economy the size of Texas. ($10 billion estimate from a study done by Columbia University Prof John Coffee) (do not even want to begin yet counting the damages done by these commissions as they are each paid by the securities industry, and appear to be rather beholden to same) (see http://www.albertafraud.com )

So we are at $35 billion each year, gouged from Canadians, about $1000 for each man, woman and child in the country. We have not even looked at a single security related fraud, such as a Bre-x ($8 billion), Non Bank ABCP ($32 billion), Nortel ($366 billion), ponzi-like income trusts, or any of the dozens of names found elsewhere in this forum. ( http://www.investoradvocates.ca ) We have not looked at the sales tricks of retail commission investment sellers, each and every one misrepresenting themselves as some kind of "pedigreed professional". Each one (four out of five, or nine out of ten depending on which product sold) placing their vulnerable clients into the most expensive investment products they can choose from, in a feeding frenzy of sales commission harvesting. (see tricks of the trade topic on http://www.investoradvocates.ca )

Please see some of the following non industry paid web sites for candid information about how your financial health is jeopardized by predatory financial professionals:

http://www.investoradvocates.cahttp://www.investorvoice.ca (read a few of the "cases" BEFORE you invest to see what banks are like "AFTER" they get caught, it aint pretty and it what they promise)http://www.breachoftrust.ca a broker tells of his quest to find ethics and integrity inside the indsutryhttp://www.albertafraud.com same broker tries to develop "accountability projects" designed to protect the public while holding criminals accountable for their actions (at an altitude where the police and prosecutors are not found) (sorry for the aviation reference)

"...........the prosecutors, hopefully most prosecutors, are honest if they're playing by the set of the rules; they're hampered by the illegal constraints. The white-collar criminal has no legal constraints. You subpoena documents, we destroy documents; you subpoena witnesses, we lie. So you are at a disadvantage when it comes to the white-collared criminal. In effect, we're economic predators. We're serial economic predators........"

FAIR Canada has issued a report entitled "A Decade of Financial Scandals" calling for government and regulatory action to improve prevention, detection and prosecution of financial fraud and to better compensate victims of investment frauds.

"The Canadian regulatory system is complex and fragmented. There are thirteen provincial and territorial securities regulators and two national SROs. In addition, there are many other provincial and federal regulators involved," said Ermanno Pascutto, Executive Director of FAIR Canada." "When it comes to investigation and prosecution of financial fraud, the complexity and fragmentation is far worse. With this bewildering array of regulators, investigation agencies and prosecutors, no one agency has ultimate responsibility for combating investment fraud."

"We make wide-ranging recommendations calling on the Federal and Provincial Governments and regulators to take coordinated action to combat financial fraud" said Mr. Pascutto. "Financial fraud has affected some 10% of Canadians and the system is simply not effective at protecting consumers, punishing fraudsters, or compensating victims."

FAIR Canada studied a cross-section of fifteen cases of financial scandals selected from across the country based on the high profile coverage they garnered, the number of investors affected and the significant amount of losses incurred. Findings from the review of the fifteen financial scams include...

While the FAIR Canada report focuses on fifteen financial scandals over the past decade, one only needs to read the media routinely to see how these types of scandals happen on a daily basis. Here are a few that have come across our desks over the last couple of months:

February 10, 2011 (The Globe and Mail) - BC securities regulator cracking down on fraud

are the on-going trailer fee commissions that your fund manager pays to your salesperson an extremely sophisticated derivative of the definition of “secret commissions” under Section 426 of our Criminal Code because of their lack of dollars and cents amounts transparencies?

SKIM: Skimmed milk refers to milk which hashad the rich cream taken off the top, leaving aless rich milk product.

For our purposes skimming refers to removinga hidden fee from a mutual fund portfolio priorto valuing the portfolio for an investor.

It also leaves a less rich portfolio for investors.

The media and casual investors intently follow the stories of investment scams and how they devastate the lives of investors and their families. It is understandable of course: a good human interest angle will definitely get the attention of readers!

In fact, the damage done by investment scams and frauds is very minor compared to the damage done within the standard “rules of engagement” between investors and investment firms. F.A.I.R. Canada has reported that as little as 2% of the dollars lost in major frauds over the past decade in Canada involved a regulated investment firm. In short the odds of being “scammed” in a recognized mutual fund are near zero. The odds on having your investments “skimmed” however are close to 100%!

THE SKIM: As an investor you put money into a fund to gain diversification and professional management. Those are worthy goals and the fund industry is fully capable of delivering on both fronts. The issue that leads to the skim is putting a value on the services you want. In effect the industry has clouded the process on two key fronts by:

n Adding mandatory “advice charges” to many mutual funds, most often through hidden and excessive sales fees being mislabelled as an advice fee.

n Portraying licensed fund sales persons as “Financial Planners”, “Advisors” or some form of Vice President / Director. These titles imply an advice or planning offering often not available.

The net effect, for most investors, is a steady skimming of your investment portfolio in return for little or no advice or planning services.

In fact, there is no requirement for a fund salesperson (your planner or advisor based upon their job title) to even talk with an investor in order to justify the skimmed fees for “advice”.

You can, in effect, be charged fees for an unlimited number of years without even knowing who your current advisor / salesperson is! Your salesperson could sell their clients to other salespeople and the advice fee continues to be skimmed annually and forwarded to the new “advisor” you have often never even met.

WHAT IS MISSING: At its most basic level, what is missing is the quality professional advice and financial planning most clients need—deserve but cannot identify or articulate without having experienced it. Basic advice such as:

n a detailed financial plan,n an annual review of the Investment Policy Statement,n disclosure of material information on changes made in fund management,n an assessment of client need versus riskn etc.

All of these would require a salesperson to spend time before a meeting doing preparation, time in a meeting reviewing client requirements and current finances, and post meeting time to implement any required changes. If a salesperson spent 3 hours per client per year doing a proper review then the fee likely could be earned.

Does it happen? No it does not. How do I know? I worked for a major bank with a large financial planning team. The bank would never allow sufficient time to do even a basic annual review. We always had literally thousands of uncompleted reviews and no prospect of ever getting caught up.

Why? Take 250 clients times (x) three (3) hours and you have 750 hours of review work. That is roughly 100 days of work per year.

So, the salesperson gets the fee if they do not do the work and

n they get the same fee if they do complete the work.

How many salespeople do you think will opt to do the work? What if you have 300 or 400 clients? The system clearly cannot work as it is structured.

WHY JOIN ORGANIZED CRIME WHEN YOU CAN GET RICH USING LEGAL SKIMMING TECHNIQUES?

As an ex-banker I was always amazed that bank robbers would risk up to ten years in jail to rob a bank for $300 (average take from a bank robbery these days is quite low) when instead passing bad cheques/cheque fraud could earn you thousands with virtually no risk of jail time. Only a dummy robs a bank using a mask and a gun these days.

Similarly, I cannot understand why fraudsters would go through the hard work and stress of scamming investors (false documents, false statements, a risky paper trail, high risk of being exposed and charged with a crime),

n when you can legally “skim” investment accounts with fees that add no apparent value and are not required to be disclosed to investors.

What Does Add Up:

Investors pay a number of innocuous sounding fees either directly or indirectly from their investment accounts. Most investors work on a basis of trust and have no clue what dollar amount they are paying in sales commissions nor what they should be receiving for those sales commission fees. This is the environment that makes the skim possible and lucrative.

The average financial planner / salesperson may have a portfolio under administration of $20 million dollars. At a mere 0.5% skim the portfolio is diminished by $100,000.00 per year. Many trailer fees are as high as 1% which translates to $200,000.00 being taken every year from client accounts. There is no accountability that would require any work to be done by the salesperson.

n The money is skimmed by the fund firms and forwarded directly to the salespersons firm.

Many salespeople lock clients into the fund via a deferred sales penalty program for up to seven years. In the simple example given, with a 0.5% trailer fee, the total money skimmed by the average salesperson over that sales cycle will be $700,000.00. Now picture a firm with 1,000 salespeople on staff. I think it becomes clear why fund sales are such a lucrative business and why your salesperson can drive a nicer car than you can.

For those who say, well the salespeople have to eat too – I will remind you of two things:

1. Front-end loaded fees: Salespeople often receive 5% of the invested funds up front from the fund firm. On a $20,000,000 portfolio that is $1 million dollars. The commission is split amongst the 600 or so client accounts of the salesperson and is again a hidden charge.(Investor Economics data suggests the average portfolio for a salesperson in the advice business is just over $20 million)

2. With the skimmed fees we are talking about a forced, concealed payment for a service that is often neither articulated nor delivered to the client.

BEATING THE SKIM:

We do not have to be skimmed as fund investors. You have several options to help fix the problem.

1. Set clear expectations with your salesperson for what you expect for the fees you pay.

a.) Communication should include monthly updates, and semi-annual conversations as well as at least one face to face meeting every year.

b.) Investment information should include an estimate and explanation of all fees paid from your account, performance results versus a set benchmark, and current versus targeted asset allocations.

2. Ensure that your salesperson has the capacity to handle your account effectively. A salesperson with 100 clients is more likely to have the capacity for a review than a salesperson with 600 accounts. Ask about support staff but remember support staff is to aid with internal paperwork not to handle client reviews.

3. Purchase low cost mutual funds and you will not have as many worries about skimming. You can purchase funds without imbedded advice fees from a number of fund firms and can purchase ETF funds without imbedded advice fees as well. Ditching your advisor / salesperson does not ensure you avoid the skim as discount brokers often take the skimmed fees that normally went to the salesperson.

n That is of course the height of skimming as discount firms are not even licensed to provide any advice to investors.

It is not easy to be a wise investor when the market is such a deceptive place.

It truly is a “buyer beware” experience and not a safe place for those who tend to trust without verifying.

This link will take you to a four minute expose describing exactly how easy it is to gain billions of dollars in an unethical and/or fraudulent manner, and if you are part of the "right" system, you will be completely above examination. Above prosecution.

It is free money for those who choose to take it. It is your money they are taking.

This post deals with the billions of dollars that was lost in the Asset Backed Commercial Paper (ABCP) fiasco. This cost you big money - approximately $1,000 for every man women and child in Canada. In terms of crime it costs nearly the same all the combined crimes committed in Canada. If you took all of the tax dollars paid for everyone you know for their entire life you would not even come close to the money scammed by "trusted criminals". This page provides a summary of the topic, hopefully, after reading this you will follow the recommended action to force the government to take action on this item and prevent it from ever occurring again. This is a true Canadian story of predatory practice by financial institutions and its enabling by government agencies.

First of all the word "crime" is used in the moral sense. Most people would think that taking billions of dollars for selling garbage would be a crime. However, even in fraudulent cases it is rare for for the perpetrators to be even charged much less convicted if it exceeds $10 million. With financial crimes in the billions, it has become apparent that police in Canada cannot act on cases larger than millions.If you are going to steal - steal big. We will tell you how they do it!

Probably the first thing you need to know is what are you are selling. Investments are the area to create and get away with the perfect crime. It is a self regulated (we police ourselves thank you) industry and below we will highlight just one (one out of thousands) of the perfect crimes that this industry gets away with, and describes how they use the help of regulators, professionals and politicians to assist them in the getaway. ABCP or Asset Backed Commercial Paper.

Investopedia defines and explains ABCP as "A short-term investment vehicle with a maturity that is typically between 90 and 180 days. The security itself is typically issued by a bank or other financial institution. The notes are backed by physical assets such as trade receivables, and are generally used for short-term financing needs. A company or group of companies looking to enhance liquidity may sell receivables to a bank or other conduit, which, in turn, will issue them to its investors as commercial paper. The commercial paper is backed by the expected cash inflows from the receivables. As the receivables are collected, the originators are expected to pass the funds to the bank or conduit, which then passes these funds on to the note holders." This paper is toxic when there is little to no chance that the receivables will ever be seen.

Now you know what you are selling here is how you proceed:

A TALE OF CRIME TWO GOVERNMENTS - Province of Alberta and the City of Lethbridge ONE CRIME - Asset backed commercial paper - subprime mortgages and other debt< ONE PROFITS FROM IT - Government regulators collect money from the investment dealers to enable the sale of questionable products WE ALL SUFFER - Even if you have not personally invested in these toxic products, your tax dollars pay for these defaulted loans

FIRST THE CRIME

TAKE TOXIC SUB PRIME MORTGAGES - Bad debt such as mortgages that have little to no chance of repayment PACKAGE THEM - Put together a portfolio of some good products mixed with bad products and promise a good or reasonable rate of return GET A CREDIT RATING AGENCY TO RATE THEM -These ratings are not provided by an independent agency. You pay the agency to provide a rating. SELL THEM TO PUBLIC (Including Government agencies such as cities, universities, etc)TO SELL TOXIC INVESTMENTS? APPLY TO SECURITIES COMMISSIONS (PROVINCIAL GOVERNMENT AGENTS) FOR PERMISSION TO SELL TOXIC INVESTMENTS- When a product does not meet the the regulatory requirements you can apply and pay for exemptions from the regulations. To see the list of current exempted products go to http://www.albertasecurities.com/Compan ... rders.aspxWHO DO YOU SELL THEM TO?

ALBERTA TREASURY BRANCH (>1.2billion)UNIVERSITY OF CALGARY (18 Million)UNIVERSITY OF ALBERTA (50 Million)CITY OF LETHBRIDGE (30 Million)RETAIL INVESTORS (4.2 Billion) To be fair to these investors they see an investment that has a good credit rating and is approved for sale in the province by the provincial security commission. Many investors do not know that both the ratings and the exemptions have been paid for through a system that rewards conflict of interest rather than prevents such conflicts. This can be referred to as putting lipstick on a pigWHO WINS (NOT YOU!) FINANCIAL INSTITUTIONS - They get rid of their bad debts and get real assets such as cashALBERTA GOVERNMENT REGULATOR - ASC earns fees for approving toxic investments. The agency that gives permission to violate our laws hands out fines of 1/2 penny for every dollar scammedYOU LOSE $30 MILLION COST TO CITY OF LETHBRIDGE TAXPAYERS$1 BILLION COST TO ALBERTA TAXPAYERS$32 BILLION COST TO ALL CANADIAN TAXPAYERS

THE GOOD NEWS (If you are the perpetrator)

NO PROSECUTIONNO INVESTIGATION No police will come; the police focus on street crimes. They typically look away at crimes over ten million. they do not have the resources or the skill sets to go after these crimes. The investment industry is self regulating.

Hey! I thought Canada had great banking laws to protect us from this. Yes, but this is not banking. The is investment manipulation, scheming and scamming to put customers money into investment bankers pockets. PricewaterhouseCoopers ranks Canada as the 4th most fraudulent country out of 54 countries. http://www.pwc.com/gx/en/economic-crime ... ndex.jhtml

LETHBRIDGE QUESTIONS

WHO WOULD PLACE $30 MILLION IN THREE MAGIC BEANS?WOULD YOU PUT YOUR OWN MONEY IN SOMETHING CALLED “ROCKET TRUST”?WHY DOES THE CITY TAKE INVESTMENT ADVICE FROM A COMMISSIONED SALESPERSON?Lethbridge answers........zero

ALBERTA QUESTIONS

WHY WOULD YOU GIVE PERMISSION TO VIOLATE OUR LAWS?

WHY WOULD YOU DO THIS WITHOUT NOTIFYING THE PUBLIC?

Alberta Securities Commission (ASC) -ARE YOU ON THE JOB.......OR ON THE TAKE?

ALBERTA ANSWERS

NONE..........ZIP.........Total silence from Ted Morton, Alberta Finance Minister in charge of the ASC. (Morton refuses in writing to provide answers or comments to our enquiries)

TAXPAYERS NET IMPACT

PAY TO BAIL OUT TWO OR THREE LEVELS OF GOVERNMENT FOR THIS MISTAKEA SINGLE CRIME CAN DO AS MUCH FINANCIAL DAMAGE AS NEARLY EVERY OTHER CRIME IN CANADA COMBINEDSECURITIES REGULATORS (ASC) THAT GAVE PERMISSION TO VIOLATE OUR LAWS HAND OUT FINES OF 1/2 PENNY FOR EVERY DOLLAR SCAMMED

2) second document is Keith Ambaschteer U of T Rotman School of business study of retail mutual fund overcharging (which I think is similar in style to the UK article) and or the resulting damage to Canadian fund investors from underperformance caused by the higher fees (search $25 Billion Pension Haircut)doc found at:https://docs.google.com/fileview?id=0Bz ... OTkw&hl=en

3) third document is the Morningstar article, which states "Total fund management expenses paid in 2002 added up to more than $10 billion." and it appears to me to be a calculation of the "sum total" of management fees paid by Canadian mutual fund investors.

I dont want to be a bother here, but I do want to make sure I have my ducks in a row. I just don't see how the Morningstar article can be held up as describing "overcharging, gouging", or what to me amounts to professional predatory practices. (which is where my interest is)

I see the UK article not looking at a sum of management fees, but a look at hidden gouging. I see the $25 bil figure by Keith A as being more closely approximating similar analysis of damage to Canadians.

What do you think of this logic? Thanks for taking a moment to fight through my convoluted argument, I appreciate your helping me to get my story better fleshed out.

7billion a year skimmed off our savings More than £7.3billion a year is being “skimmed off” the value of Britons’ savings by City bankers and fund managers, an investigation by The Daily Telegraph has found. LONDON TELEGRAPHBy Holly Watt, Jon Swaine and Elizabeth ColmanPublished: 10:36PM BST 30 Jul 201021 Comments

City bankers and fund managers are 'skimming off' more than £7.3billion a year from the value of Britons' savings Photo: GettyA range of questionable hidden fees and levies are being deducted from investments, making it difficult for a typical saver to make money from the stock market. Britain’s eight million investors are losing an average of £800 a year each to the hidden levies.An investor putting £50,000 into a fund providing typical returns over 25 years would lose out on £108,000 because of unnecessary charges, said David Norman, a former chief executive of Credit Suisse Asset Management.

Related ArticlesHIdden fees cut value of pensions by halfWhy British pensions should go DutchCustomers have no way of claiming back their lost savings because fund managers are not doing anything illegal or beyond the rules. However, they are now likely to face increased scrutiny from regulators, while the Government could come under pressure to announce an inquiry to clean up the industry, which millions rely on to save for their retirement.The problems have been compounded by the lacklustre stockmarket, which has hit savers as City firms have rushed to protect their profit margins by increasing fees.Research has shown that fees in this country are far higher than those in America, where investment funds have been the subject of several regulatory and other official investigations.Several senior City figures have decided to blow the whistle on the practices, with one fund manager describing the system as a “legalised cartel”.Alan Miller, a former senior fund manager at New Star, one of Britain’s biggest investment firms, and a co-founder of SCM Private, told The Daily Telegraph: “The time is right for exposure of various elements of the industry.“It is riddled with blatant self-interest and conflicts of interest that would never be tolerated elsewhere. Investors have become victims as the charges they have to pay have risen and risen while the returns they get have been consistently below par and the actual cost of managing their money has continued to fall.”Research compiled by the Financial Services Authority and leading data analysts suggests that investors face losing three per cent of their investment each year in charges and fees. However, Mr Miller and Mr Norman said annual charges as low as 0.5 per cent were achievable.When a saver invests in an ISA, unit trust or other fund, they are informed that they will pay an “annual charge” – typically 1.2 per cent of the value of their savings. The majority of funds levy exactly the same charge.But the firm also deducts a range of other vaguely defined fees – covering everything from research to office costs from the savers’ money.In particular, funds charge savers fees and commission every time they buy or sell shares. In some funds, hidden fees can be more than three times higher than the publicly-released annual fees.For example, according to the data company Lipper, the Halifax UK Growth fund, one of the country’s most popular investment schemes, has only returned 7.47 per cent to savers over the past five years.Therefore, someone investing £10,000 would have received interest of £747. However, that the fund has actually risen by 15.79 per cent and the extra returns have been pocketed by the fund manager and City brokers.Data from Morningstar, a research company, shows the average investment fund has an annual charge of 1.25 per cent. But lesser known administrative fees amount to 0.45 per cent. And trading costs total another 1.35 per cent, according to the FSA and Financial Express. This 1.8 per cent being deducted from the total £406 billion invested amounts to £7.3 billion being “skimmed off” each year.Julie Patterson, director of authorised funds and tax at the Investment Management Association said: “The UK fund management industry is one of the most competitive in the world.“Less than 50 per cent of the annual management charge (AMC) is retained by the manager, to cover fund costs, including investment management and administration. The majority of the AMC is used to pay advisers, brokers and platforms. Charges for UK authorised funds are fully disclosed and they vary.”

(advocate comment........Keith Ambaschteer's University of Toronto study and release article titled, $25 BILLION DOLLAR PENSION HAIRCUT sums up damages to Canadians of nearly quadruple those skimmed by clever financiers in the UK. Prof John Coffee's (Columbia University) study for Govt of Canada Finance placed a regulatory burden damage of $10 billion each year just due to Canadian multiple regulators. (all of which have their hands in the pie)) (that makes $35 billion each year in damage to Canadians with just TWO studies, and not yet talking about a specific stock, or a misrepresented investment. The total damage is greater each year than the cost of each and every other crime in Canada combined.)

It is 2005. In a tower in Toronto, sat the men, finance experts pondering how to profit from markets today. Where is the biggest kill?

“How about this? We create trusts, take investors money and put into the trusts telling them that they are secured investments.........”

The selling off of many things truly Canadian has left some investment banking types scratching their heads as to “what to sell next?” “How do we generate our next fee or commission?” The result is a plethora of complicated derivative investments, cooked up like crystals in a meth lab, in an attempt to create something to pass on to investors.

In a game of financial “hot potato” substandard investments get artfully passed from sophisticated investors (financial dealers) down to unsophisticated buyers (retail investors). The game is to pass these investments down to the ultimate loser as fast as possible, earn your commission and move on the the next deal. The lowest man on the totem pole is the lonely retail investor (that is you and I) and in a predatory environment, we are the prey, despite whatever your investment dealer might tell you.

Along come sub prime mortgages, people betting against those sub prime mortgages, institutions hedging the sub prime notes they already have, people concerned about the upside or the downside of this Asset Backed Commercial Paper.

They cook up these trusts, with cute names such as “Apollo, Rocket, Opus, and Planet”, take money off ordinary Canadians, send it overseas to a German bank as collateral against the sub prime market failing. God only knows what will happen in the end, but we will have our millions in fees, so do we really care? This is dual agency (acting on both sides of the transaction, seller AND trusted advisor) in Canada. Nothing like that is as easily allowed in real estate or other professions, but investments in Canada are still a game of self regulation, which in other words means, “anything goes”.

Step twoThe con

These trusts do not qualify to be sold under most securities law in canada, so we need to put some lipstick on the pig with two items. First we need to have a better credit rating, and second, we need to get the securities commissions to look the other way for a little while. The credit rating agencies are for sale, so that one is easy. Luckily there is a loophole in the securities regulatory system that grants the regulators the “discretion” to hold sway over the law from time to time. Here is the exact wording from the new proposed national securities regulator,

“236. If the Chief Regulator considers that it would not be prejudicial to the public interest to do so, he or she may, on application or on his or her own initiative, make an order exempting a person, trade or security from any provision of Parts 3 to 10 or of the regulations.”

So this too will be a breeze. These so-called “regulators” get to “sell” permission slips to violate the securities act. This happens every day in Canada, to practically every sales organization in the country, and the beauty is that “there is no provision in the act that says we have to notify the public” when we do this. (Ontario Securities Commission (OSC) quote) What a gift for those seeking to profit from breaking the law. Are you starting to get the impression that we are all in the wrong business?

Step threeThe insiders

We approach friends at one of 13 securities commissions.We pay their salaries so we have an easy entrance. (Thank god for self regulation)

One of the gifts of self regulations is that we appoint, pay and some would say “own” the regulators of financial products in Canada. That makes it a simple matter of paperwork and an exchange of money to get these same financial regulators to approve of something called a “legal exemption”. Simply put, we apply at the easiest or closest securities commission for permission to sell these “hot potato” investments which cannot otherwise be sold. They do not meet our laws without this exemptive relief. All 13 securities commissions grant the relief, since all of them depend on the millions of dollars of revenue that we pay them for just this kind of thing. Presto! An otherwise illegal investment is turned into a legal one, and we do not even have to notify the public that we took this hidden step.

The second gift given to those who “self regulate” is a little game in Canada called ther “passport” system, whereby if one securities commission approves of a legal exemption, typically (and for money) the other twelve will go along. We are told that the passport system enables a smoother flow of securities rules across thirteen jurisdictions but what it does best is assist in the flow of financial abuse across jurisdictions.

Step fourThe crimeWe dump this product immediately onto other investment dealers knowing that they will “dispose” of the corpse by pushing it off onto unsuspecting retail investors. City treasury’s, mom and pop investors, university’s etc. Their “retail sales force” motivated by commissions and loyalty to the company, get into high gear, get on the phone and start calling the suckers, er customers that they hope to unload this product on. It must be noted and applauded that in Canada TD Bank was one of the only financial dealers who did not try to ride this gravy train. Thank you TD.

Step fiveThe lookouts

You always need to be on the lookout for the cops, even when you have “legal permission” to break the law. It just pays to cover all the bases.In that respect our highly regarded regulators and self regulators have made their way into the RCMP and onto something called “joint management committee’s” inside the commercial crime division, the IMET. (Integrated Market Enforcement Team) With our own industry people, from our own industry associations so carefully placed, and above examination, we can “help” to ensure that the right people do not get criminally investigated.

Step sixThe cleanup man

To put additional insurance on making sure that the right people do not get charged for this perfect crime, we need a “cleanup man”. The mafia-like guy who can dispose of any traces of the crime, any bodies (figuratively speaking, this crime involved no loss of life). In the United states when the sub prime crime reared its head, there was involvement by the president, FBI, Treasury secretary, Federal reserve as well as congressional hearings and senate hearings to question the culprits. Here in Canada, all those people paid salaries in similar capacities turned away for some reason. Also turning away were the self regulators, the securities commissions (who granted the permission to violate our laws). Perhaps they are afraid of being investigated themselves?

The person appointed to clean up the mess, and try to make sure the right people do not get hurt was a private lawyer, chosen for his ability and his connections in doing this kind of thing. Previously he had involvement in tobacco smuggling operations, (called the largest fraud in Canada by the RCMP) and he was able to get himself and senior exec’s free of criminal matters in this case. A fine of one billion against the company, (Imperial Tobacco) while he was the president of the parent company. So there is your experienced cleanup man.The fist thing he does is to try and negotiate immunity from civil and criminal prosecution for the “boys” in the back-room. He succeeds in getting civil immunity for the boys but criminal immunity is not allowed. Not to worry, as the odds of any police in Canada investigating this one are slim to none. Remember that we have some of “our boys” on the inside at the RCMP.

Step sevenThe penalty

One half of one cent for every dollar missing. Not bad.After the cleanup, after the damage control, after negotiations for immunity, and a great deal of government money to pay back investors, the securities commissions awake from their slumber, feel that it might be safe to poke theirs heads up, and take some perceived action. They know that 99% of Canada still does not know that they granted permission in the first place to allow this product to be sold, so they feel pretty smug in stepping up and imposing “pretend” penalties on the culprits. Little do we know of the incestuous relationship between the culprits and the “regulators”. Susan Wolbergh Jenah was the vice chair of the OSC when she was busy signing her name to legal exemptions to allow these dubious products to be sold without meeting laws. Then a few years later she moves to the head of the Investment Industry Regulatory Organization of Canada (IIROC) (gang of investment dealers) and lo and behold she comes out now saying that “the dealers did not know what they were selling”? One wonders if she had a clue when she allowed them to be sold, or if she was just happy doing what she was told in order to collect a $400,000 salary at the time. Her new salary at IIROC went to $700,000. It is amazing what you can buy with a six figure salary. Do not go to jail. Collect $32 billion.

Step eightThe profit

99.5 cents profit on every dollar taken. “Shoot, I was hoping for 99.9%”, you could almost hear the investment dealers say. “We will have to give the securities commission people a $100,000 raise in salary so they get it “right” next time”.

The fines imposed amount to a huge number in the newspapers ($140 million), but in actual fact amount to less than one half of one penny for each and every dollar missing. $32 billion missing. Hundreds of millions of dollars in fees to the manufacturers, sellers, lawyers, regulators, receivers, mafia-type cleanup man, and so on. And nobody can be sued, nobody going to jail.

$32 billion is not quite equal to the cost of each and every other crime in the country, combined. Just about. Also just about the cost of running the province of Alberta every year. From one crime. One set of legal exemptions. What about the other 5000 legal exemptions since the year 2000?** Can anyone tell us what benefits came to the “dealers” and damages were done to the public by letting investment sellers like Nortel, CIBC, Fidelity, Global Strategy, Crocus, Mackenzie Financial, Yorkton, etc., etc sell investments that needed an exemption to the law?

It is hoped that Canada gets an improved securities regulatory system soon, as it is unlikely that the country can afford to let the most cunning, clever financial people people police themselves any longer on the honor system.